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September 4, 2022

Are NFTs Bad for the Environment?

The environmental impact of NFTs is something that is often overlooked. While the technology itself is still in its infancy, there are already some concerns about the amount of energy that is required to create and verify these digital assets. One study estimates that the carbon footprint of a single NFT could be as high as 4,750 kg of CO2 – which is equivalent to the emissions from a round-trip flight from New York to London!

As NFTs become more popular, it is important to consider the environmental implications of this new technology. Can we create NFTs in a way that minimizes their impact on the planet? Or are they simply too damaging to be sustainable in the long term?

Why NFTs impact the environment

The primary reason why NFTs have a large environmental impact is due to the amount of energy that is required to create and verify them.

In order to create an NFT, a digital file must be hashed – or converted into a unique code using a mathematical algorithm. This process requires a significant amount of computing power, which in turn uses a lot of electricity.

To put this into perspective, one study estimates that the average NFT transaction consumes about as much energy as two households use in a day!

In addition to the energy required to create NFTs, there is also the issue of the “proof-of-work” system that is used to verify these digital assets. In order for an NFT to be verified, a miner must solve a complex mathematical problem. This process also requires a significant amount of computing power and electricity.

While the proof-of-work system is necessary to verify NFTs, it is also a major contributor to the environmental impact of this new technology.

With "The Merge" or Ethereums transition to Proof of Stake, this will hopefully alleviate a significant portion of the environmental impact of NFTs that run on the Ethereum blockchain, but there are still other factors to consider that make them energy intensive.

How can we reduce the impact of NFTs on the environment?

There are a few potential ways to reduce the environmental impact of NFTs. One option is to use alternative hashing algorithms that require less energy to create and verify. Another possibility is to move away from the proof-of-work system altogether and use a different method to verify NFTs.

It is also important to note that the environmental impact of NFTs will likely decrease over time as the technology becomes more efficient. As we learn more about how to create and verify NFTs, we will be able to reduce their energy consumption and ultimately make them more sustainable.

In the meantime, it is important to be aware of the potential environmental impact of NFTs and to consider ways to reduce their footprint. With a little effort, we can ensure that this new technology does not come at the expense of our planet.

Jacques Potts - Sr. Marketing Manager at Ledgible and experienced financial author, marketer, and crypto expert. His work has been featured on The Street, Project Serum, FirstTrade, and Invstr.
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